U.S. official urges Japan to quickly fix economy

WASHINGTON -- Japan's new government needs to move rapidly to fix its banking system and stimulate its recession-mired economy, Deputy Treasury Secretary Lawrence Summers said Thursday.

He declined to comment on a news report that bad debts held by Japanese banks approach $1 trillion, nearly twice the official estimate.

Speaking after a Senate hearing, Summers said that among the economic areas new Prime Minister Keizo Obuchi has to address is the need for "an aggressive infusion of public funds" to resolve the banking crisis and boost the domestic economy.

He said "these economic imperatives remain present with the political changes. We hope the new Japanese government will move rapidly and effectively in each of these areas."

Summers said the U.S. government would remain in close in contact with the new Japanese government. The Clinton administration is counting on Japan to get its financial house in order so it can help efforts to rescue other faltering Asian economies.

State Department spokesman James P. Rubin congratulated Obuchi on his election as prime minister.

"We have worked well and closely with Mr. Obuchi when he was foreign minister" and "we look forward to continuing that productive relationship in his new role," Rubin said.

Commenting on Obuchi's choice of Kiichi Miyazawa, a former prime minister, to be finance minister, Rubin said Miyazawa was a widely respected figure in the United States. He said the administration expected to continue a constructive relationship with him.

Asked whether the new government was likely to do better with Japan's economic problems than its predecessor, Rubin said, "We want to judge Japan on its actions, and we want them to deal with these challenges as soon as possible."